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I respectfully disagree with your interpretation. Basically, I'm assuming that your document is pre-approved language. If so, almost certainly it will have some sort of "fail-safe" language. For example, that if the Eligible Employee does not complete the stated hours of service requirement in the specified time period (in your case, 520 hours in the 3-month period) they will become subject to the 1 Year of service requirement. Which of course, is 1,000 hours. Where in 410(a) do you see anything where the IRS indicates that 520 hours in 3 months is unreasonable or unduly restrictive? As long as the plan is written such that you can't violate the age 21/1 YOS standard (or 2 years if 100% vested) you should be fine. I'm oversimplifying here, I know that...but I don't want to delve into every possible permutation!

I'm not a CPA but form the company tax standpoint whatever will go on the W-2 will be what is deducted either as wages or contributions on the corporate tax return. Assuming you are now doing refunds instead of a QNEC to pass, the participants will receive 1099-Rs from the Plan for their refunds and that will have no impact on the corporate tax returns.

I agree with Belgarath. Many pre-approved plan documents have sections where eligibility for full-time employees and part-time employees can be set separately. 520 hours in 3 months is very similar to saying full time employees need 3 months of service. Those same documents tend to have the fail-safe language that Belgarath mentions so that even if someone is not in after 3 months, they would satisfy eligibility with the maximum 1 year of service with 1,000 hours.

Maybe I've got it all wrong, but I don't believe you are required to have Roth to allow catch-ups. It's just that if you don't have Roth, then the HPI's cannot do catch-ups. Am I missing something?

FWIW, and I understand this isn’t helpful, I despise everything about this rule; especially the application of the unique compensation amount.

Belgarath’s query is about a nonqualified plan—an unfunded deferred compensation plan for select-group employees of a nongovernmental tax-exempt organization. A nongovernmental tax-exempt organization’s § 457(b) plan is not a § 402(c) eligible retirement plan, and so can’t be the “from” source of a rollover. For an unfunded deferred compensation plan, a participant has no more than a contract right to be paid the deferred wages when and as the plan specifies. So, much might be accomplished by working with the law of contract rights, releases, amendments, and novations.

Why? What is your relationship to the plan? To the parties? Do you know whether the divorcing parties expect to include any particular assets (in this case, the 401k accounts) in their asset division? Even if you do know, is it any of your concern? Is it possible the parties will find ways to simplify asset division by ignoring some? Is it possible both accounts are small enough so as to be trivial? (BTW, these questions might be inter-related.) I'm not really asking you for answers, just pointing out that the plan (and its administrators) should stay out of the legal proceeding. It seems likely the QDRO procedures direct you to act on a (draft) DRO only if you get one. Alternatively, if your QDRO procedures direct you (or someone) to speak up (or take any specific action) whenever you hear about a potential divorce of a plan participant, then you should quickly engage an ERISA attorney to help you correct that.

This is addressed in Rev Proc 2021-30 under the "missed deferral opportunity"/"failure to implement an employee election". The employer must fund the total match the employee would have received had the correct deferral election been applied timely. In other words, if the employee elected to defer 6%, the match is based on a 6% deferral election, not the QNEC amount for the missed deferral.